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News/Business. Becky Quick, Joe Kernen, Andrew Ross Sorkin. Business news and talk as the trading day unfolds on Wall Street. New. (CC)

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Us 39, Dell 19, S&p 19, Becky 16, U.s. 16, Europe 9, Barry Knapp 9, Washington 8, Aflac 7, Steve 6, Brian Shactman 6, Steve Cohen 5, Delphi 5, Steve Liesman 5, Barry 5, Blackrock 5, Ian 5, Julia 5, United States 4, Herbalife 4,
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  CNBC    Squawk Box    News/Business. Becky Quick, Joe Kernen, Andrew Ross Sorkin.  
   Business news and talk as the trading day unfolds on Wall...  

    February 4, 2013
    6:00 - 9:00am EST  

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good morning. today's top stories, the bulls handing out rally kaeps on wall street. the dow away from its all-time high and a taxing debate in washington. president obama once again says he's going to seek to get new revenue to help bring down the deficit and specifically, he's now calling out carried interest tax breaks again. we'll see where that goes.
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plus, the story that everyone is talking about this morning, the ravens holding on to beat the 49ers in the super bowl after the lights went out for 45 minutes at the superdome. we're going to try to keep the lights on. "squawk box" begins right now. ♪ if you like it then you should have put a ring on it ♪ ♪ if you like it then you should have put a ring on it ♪ >> good morning, everybody. i'm becky quick along with andrew ross sorkin. joe kernen is on vacation today so we're joined by steve liesman. we're happy to have him here. our top story this morning, the market. we have assembled a trio of wall street's most respected voices to join us for the next hour. we have a lot to talk about this morning. plus, there is that issue of the lights going out at the super dole last night. officials say an abnormality in the power system triggered an automatic shutdown forcing backup systems to kick in.
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but they weren't sure what caused that initial problem. 34 minutes that the lights were out. brian shactman will join us in just a minute for the full story. this was a super bowl to remember for a lot of reasons, not the least of which the lights going out like that. let's get out to the headlines. the dow and the s&p 500 closing friday at their highest level since 2007. the major averages posting a fifth straight week of gains. u.s. equity futures this morning, you can see, are lighter, down by about 33 points for those dow futures. s&p futures are off by about 4 1/2. but, again, the dow above 14,000 for the first time since october 2007 on friday. oil analysts are saying that trading could be choppy in the energy markets today amid growing tensions in the middle east. yesterday, israel hinted that its air force may have been behind the air strike. on a missile site in syria in order tody stroi weapons it believes were headed for lebanon. you can see right now, crude oil
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prices down by about 11%. 96.85. and, steve, i'll send it over to you. >> we'll talk to boeing about compensation for the grounding of the dreamliner. it estimates it will cost nearly $8el million through tend of march. barclay's finance director chris lucas and the bank's top legal expert are set to retire. the departures add to change at the top as the financial giant struggles to put disasters behind it. resimple in moment will officially become blackberry today. the rim name doesn't completely disappear until shareholders approve the change at the annual meeting which usually takes place in july, andrew. >> if you went to sleep after halftime at the super bowl last night, you missed a lot and i mean a lot because i thought this game was kind of over. >> that's why you went to bed? >> i didn't go to bed.
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i stayed up. >> i went to bed, but -- >> you definitely went to bed. let me come down here. >> we were watching twitter and put it back on. >> social media in this instance was tan fastic. >> my name is brian shactman. i've been employed at cnbc since june 2007. >> and tell us about what the heck happened last night. >> you're the guy who came here just before the crash. now you're covering sports and the lights went out the. >> correct. >> wa do you plan to do next sthp. >> angela lansberry's "murder she wrote." lisp, if the outcome was different, the conversation would have been much different today. but the game basically looked like a route. joe flacco had three first half touchdowns. they were up, 28-6 after the kickoff return to begin the second half. and then the lights went out. now, i just -- i don't know if we have the element or not. we have a full screen of what
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entergy, we'll take a look at some of the highlights first. i'm not sure. we're a little late on that. but the lights go out. the way the company is explaining it is that the power was going into the superdome, and this is a statement here. a piece of equipment that is designed to monitor electrical load, okay, sensed an abnormality and the circuit breaker kicked in and that's what happened. it took 34 minutes to get the game back up and running and then, when it did, it was a different game. >> yeah. >> this is really -- i mean, i know the statements there -- do you have any idea, like, whose fault it was at this point? >> i think clearly entergy says it's not their fault. and there are unconfirmed reports of a fire within an elevator within the superdome. there's been denials of that and whether that might have triggered it. and some say beyonce sucked up so much energy that there was a problem. but basically, there was some
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sort of power surge and an automatic breakerer kicked in. when that happens, it takes time to restart because the generators kick in and you have to transform back to electrical. so it took 4 the minutes and the game was totally different. >> was there a sense of calm during the darkness? >> that's another great issue. everyone pretty much stayed in these seats and tweeted. >> my favorite tweet, by the way, was in hindsight, maybe installing the clapper was a bad idea. >> and maybe, you know, when jim was behind as a kid, he smacked out the lights. i saved and rete teetweeted a bf different things on it. and we'll get into ads later, oro did you can even dunk in the dark. they had it out there immediately. and you saw the audi one where they said this was a mercedes problem? >> and the bottom line is, san francisco made it all the way back, had basically first and goal to take the lead and did not score.
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if san francisco had won the game, this would be a much different conversation. >> did you have any idea there was an animated conversation between harbaugh, the ravens coach, and some official. >> yes. >> and he was really rangely about something. any idea what he was angry about? >> the niners harbaugh was not happy about a potential holding call. >> when the lights came back up, then part of the biggest problem was they couldn't get communication, right, from the coaches? right. they had the electricity on the sideline -- there's certain electricity was up and is running and certain electricity wasn't. they can talk directly to the quarterback inside the huddle and all of those things. you talk about the holding penalty at the end, there's a lot of story lines when they had first and goal, san francisco thought that there was a penalty against them and jim harbaugh complained about that and john harbaugh was mad because his team was winning by a ton.
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some people think cbs should have been more regressive reporting wise demanding answers from the nfl. and my only response to that would be -- well, the announcers couldn't talk. the sideline reporters had to take over. i think keith obermann tweeted when steve tasker was introducing 60 minutes, he got his first start when he was a breaking news reporter on the sidelines t super bowl. it ended up being an incredible super bowl because of this. but if san francisco had won, i think it would have been an absolute firestorm because if they would have lost the game, they lost momentum during the blackout? >> who is responsible for the superdo superdome? >> there's an acronym for it, and obviously we're still developing into this, but there's a management company and i don't know all the details. but it seems pretty clear from all the reporting that entergy, they're not responsible for it. i looked at the premarket trade.
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i didn't think there was much action on it, becky. of course, we always look at that. it was an incredible theme. >> i get to sit in your seat a lot and people ask you for an opinion on something and you're a reporter, you want to stay down the middle. was it a holding call? >> i think that -- >> come on. come on. >> if i was going to give it an opinion, i think it was an okay call at that point. they called a bunch of plays. kaepernick, one of the most incredible athletes i've ever seen, he doesn't like to get hit. maybe he should have tried to dance a little bit. if you're going to hang your hat on a call, i think you're looking at the wrong place. >> you'll be back, right? >> i have ads. a ton of opinions on ads. >> wait a minute, you don't have an opinion about the game and you have an opinion on ads? >> when you're trained not to
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have one and then you're asked to give one, it's not always an easy answer. president obama sat down to do an interview that aired before the big game last night. among the most interesting parts for the business community, his thoughts on taxes and specifically carried interest. >> i don't think the issue right now is raising rates. there is no doubt we need additional revenue coupled with smart spending reductions in order to bring down our deficit. we can do it in a gradual way so it doesn't have a huge impact. the average person doesn't have access to carried interest income where they end up paying a much lower rate on billions of dollars that they've earned. >> he also has some interesting views on football, but we can talk about that later. our guest host this morning, rebecca patterson and barry knapp, our all-star cast. thank you for being here. we can talk football, but we should probably talk markets and
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the rally on friday. ed, i was reading your notes last night that we're in a go goldie locks period. >> she's back. she's sort of a home body. she's not really a party girl. i don't know if she was watching the super bowl or not. but the fact is, for the past three years, we've had all sorts of scenarios to worry about. really dooms day scenarios. and it seems that just since the beginning of the year, everybody has sort of calmed down a bit and we've had a pretty significant relief rally, which is really what this bull market has been about all along. >> the unemployment numbers come in basically as expected. >> yeah. >> in the old world, that would be disappointing to people. >> sure. the increase on the unemployment rate might have been the most bullish part of that report because that just means the fed is going to continue on its course of trying to get 6.5% -- >> not that we're betting on that element. >> it's the combo. it's the growth is improving, but slowly enough that the fed is still there not taking the punch bowl away. that's the dream equity.
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>> and friday was a dream scenario for economic data. there was so much good news that came out on friday, the market just -- because of opportunity to have a power. >> but how long is this lasting? >> not long. not long at all. and i think, you know, you've hit on a little bit of the issues so far. the title of our note this week is taxes aren't transitory. so people looked at the gdp report and said, oh, the parts of the report that were weak were transitory and the parts that were strong, that's something to be encouraged by. we actually think the opposite. so defense spending dragged down the report. that's not getting any better. the sequestration will likely go through. inventory rebuild, i think that that is premature to expect that. there's still excess inventories in autos, like trucks, for example, and then global trade, which looks considerably fairly weak and will probably stay weak. whereas the parts of the report that were viewed as strong, capital spending but most importantly consumption are likely to be very weak in the first half of the year. we just raised taxes by $200
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billion. you hear the president, he wants more tax hikes, he wants more spending cuts. we think capital spending will get better through the course of the year. but what we heard through corporate america is that the near term outlook is still pretty soft. there's parts of the report that people took encouragement from are going to get worse during the first half of the year and that we're not going to necessarily print another zero on gdp. >> everyone sees the markets rocketing on friday who called their brokers to receive either at 4:00 on friday or was thinking of calling their broker saying, you know what? i have this extra cash lying around. we should get in before this train completely loses. did the train leave the station? >> i think the brokers are calling their acts down saying, you know, you've been putting all those money on bonds. maybe it's to him to put some in equities. >> or you've been sitting in cash for the last three years. you need to put some of that money to work. >> but are they too late? but you shouldn't let being too late stop you from doing
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something. take a baby step, at least. >> it sounds like you two are in a different -- >> they put the bulls together today, i think. >> so, look, we have a bullish outlook. >> let's get rebecca to respond. is the consumer going to be weaker? is capital spending going be weaker? and do you expect these big defense cuts to be -- >> well, i think the sequestration is something we have to watch. steve, you would know this better than i do. 0.5% or maybe more from the sequestration this year, 100 billion, 120 billion, if it goes through as is. but to barry's part, we're probably going to get more with the budget process later this spring in terms of obama was talking about closing loopholes, there will be more avenue a fiscal hit from that. on the consumer, i think we have to wait and see. i mean, i was encouraged friday, i think it was, the final january confidence print, consumer confidence print went up. and that to me was kind of a, hmm, scratch my head moment
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because it's the consumer's feeling, the payroll tax hit, how come confidence is still going up? >> it's not actually going up. if you look at that income report, their income expectations dropped like a stone. and the same thing happened on tuesday where incomes in that 25 to 50 category that got hit by that payroll tax reversal, those parts went down sharply. so there is a cash flow element to this. and if somehow the u.s. consumer shrugged off a $200 billion tax hike, we would be the first case in the last ten years. >> you always have to balance that. you correct lid pinpointed where the negatives are, but the housing market is definitely improving and the consumer, if the stock market -- it's sort of a -- admittedly, iepts a secular argument here, but if the stock market keeps moving higher here -- >> what's the point? >> what's the limit of it all?
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>> when 13 -- >> one thing that encouraged me from the report was this. we made a big deal, and i think rightly so, we had a lot of executives here ahead of the fiscal cliff debate saying it's hurting our confidence and our ability to hire. what did we find out? we found out there was a step change in private sector hiring from a three-month average of 185,000 to a three-month average of 220,000. i'm saying despite that it went you up. i'm thinking that if you remove that uncertainty, that lock of confidence in the future, that maybe you get even better results and that -- >> i've been stunned by what ceos have been saying in this earnings season. i've been stunned by how cautious they are, how uncertain they are. >> but the reports have been okay. that's the thing. >> but the tone of what they say they see happening in the second half has concerned me. i've been surprised. it's surprised me to hear that much caution out of people who
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in the past traditionally have been more optimistic. >> we're coming off the weakest capital spending outside the recession in 20 years. we have a bounce in the fourth quarter. it may have been front loading ahead of the expectation that we would end the accelerated depreciation. that may have boosted it a lot bit. we think that will get better through the course of the year. what we heard is they guided expectations down, not up. additionally, on the labor front, we had two months in a row of the household survey being quite soft. now, household surveys obviously far more volatile than the establishment survey. but it does tend to lead a little bit when you combine that with the jobs plentiful jobs hard to get element. >> 1.2 million in the last two months in the household service. >> it's huge. >> on unemployment. so the fact that there was giveback this time around -- >> there it is there's so much nose in that employment report, i tend to focus on wages and aggregate hours to work. and it rose 0.3% in january to all-time record high. it is highly correlated with
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wages and salaries. incomes are increasing. >> total hours worked series was only up 0.1%. >> i'm saying wages and total aggregate hours. and i'm looking at the trend and the trend has been -- it's not exactly straight up, but it's been very strong. >> wa gets me more, the watch that was similar to last year this time around was gasoline prices. we had seen them come down so much between september and december and they're starting to creep back up. we saw the same pattern in q1 last year. that might be too much for the consumer to bear. if that keeps going, that would make me a little bit more nervous. >> guys, we're going to continue this conversation. ed, rebecca and barry are all staying with us. we'll talk about the key events this week that could make or break the story for the bulls, continue this debate that we're having right now. before we get to that, though, attention, parents, kids and happy meal lovers everywhere. get this. mcdonald's says that it is offering its first new happy meal andre in a decade.
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welcome back to "squawk box." on friday, the dow finally crossing back above 14,000 for the first time in, oh, more than
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five years, october 2007, you can see right now those equity futures are indicated slightly weaker this morning. dow futures down by about 30 points and the s&p futures are down by about four points. anything could happen this morning and you are talking about five weeks of incredible gains for these markets. in our headlines this morning, the united states and mexico have reached a tentative agreement on cross border trade and tomatoes. the deal narrowly averts the trade war that threatens to encan you feel a number of american businesses. the agreement raises the minimum sales price for mexican tomatoes in the united states. it ames to strengthen compliance and increases the types of tomatoes governed by the bilateral tax from four to one. steve, over to you. >> becky, thank you. the dow hitting that all-important 14,000 mark last week. what about the january barometer? joining us now to talk markets, jason and maury harris. guys, i don't know what people are going to talk more about, the super bowl or dow 14,000.
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over the weekend, i did get a lot of questions about what people ought to be doing with their money right now. maury, barry gave us a gloomy outlook here. what are your thought, maury? >> well, i think last late year you didn't know it was there and now you know it's there. we're seeing very good gains on house prices. that's the biggest asset for most house sales. so i think both on the income side and on the -- the other side is -- on the wealth side, things are improving for the consumer. >> jason, you know, tony, who owns joey's coffee shop, i don't know kwl it's still called joey's coffee shop, tony owns it now. are you worried that the mom and pop investor come in right in the teeth of really what's going to be a sell-off here?
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>> well, look, i think we have to kind of look at this kind of like what we saw last night. a strok first quarter doesn't necessarily mean the strongest of finishes, particularly when you have the power outages coming off along the way. we've had a strong first start, but the momentum here can easily turn the opposite direction. we remain cautiously optimistic at this point. we think that there will be some momentum going in through the rest of the year. but that momentum may slow down and, you know, what may look like a route here in the first quarter will likely end up being more of a nail biter as we go through the rest of the year. i mean, we're still in the slow growth environment. we're still deleveraging. we're still dealing with fiscal austerity. i don't think the markets are fully taking that into account right now and investors have to be aware of that. >> so what exactly are you -- would you be telling clients right here? let's say they have been, like a lot of people, heavily into
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these irisk off bond portfolios. would you keep them there? >> we've been saying the same thing for quite some time right now. the environment we've been in is not one for somebody that's hunkered down, defensive, holding cash in treasuries. you're almost guaranteed to underperforming inflation investing in those things over the last five to ten years. even the shorter term period, you may see bigger puts. equities have a lot of risk to them. what we've been doing is positioning people in the middle of the risk sector. that means lower risk, stable, dividend paying equities, taking risk in your fixed income with high yield bank loans and using unique investment options like secured options where you're selling calls against your equity portfolio to generate a little extra kick in return on top of on a slower growth environment. >> i was encouraged by that 200,000 plus on the private sector job growth with all the talk about the fiscal cliff. what is your outlook for the private sector and for payroll
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growth and, of course, you have to start to fold in the federal reserve and how quickly you think we get to the 6.5% unemployment rate. >> well, i think you're probably -- excuse me. you're probably going to see private jobs running around 200,000 a month this year. and i don't think economists put enough weight on what the fed is doing in here. you know, the people ring their hands about the sequester being close to 80, 85 billion a month. that takes a year. and this is what -- and they're putting that much money back in the economy each month. this is very powerful stuff. we're seeing, you know, further expansion in bank lending. i think today in the loan officer's survey from the fed, you're going to see further easing and bank lending standards which we have found to be a pretty good leading indicator of the overall economy. >> bank loan portfolios year on year were up 80 basis points. that's less than 1%. and there's still a huge credit
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impairment in the mortgage part of the market, which is roughly 50% of bank balance sheets. again, those issues are fannie and freddie mispricing the risk on the high end, fha mispricing the risk on the low end. no requirement in the game roles. that's where you need -- when you look at the senior loan officers survey, that's where you see -- >> i want to ask you a question, macro question. if you had a choice, let's say you had one of those time machine things and you could take the global macro environment for dow 14,000 in october 2007, or the global macro environment for dow 14,000 now, which one would you take? >> right. so, steve, i think where people are getting messed up about all this is, the dow is getting up to its all-time high. a couple years ago. >> so we have all that gdp underneath and global gdp? >> people forget that earnings fell 50% during the crisis and
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then they came back. the market is just making it back towards those previous -- >> it's that much longer. >> why wouldn't they be that much more bullish? >> because we're not going to get real gdp in the near term. the dow has had a big move. >> the music is playing, but this is a great conversation we're going to keep having. maury and jason, thank you very much. andrew. >> coming up, we have new details at the heart of the government's insider trading case against the portfolio manager at s.a.b. capital. we've got the details after the break. plus, gasoline price res going to be rising at the pump and we're going to ask if the trend is likely to continue. all stations come over to mission a for a final go.
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good morning. welcome to "squawk box" here on cnbc. a little beyonce post super bowl. i'm ars ars along wi loandrew r along with becky quick and steve liesman who is sitting in for joe kernen. new details are suggesting that a possible line of defense or the former portfolio manager may raise questions about whether the government will be able to build a case against cohen, which has been all the speculation. federal prosecutors claimed that sac dumped millions of shares of pharmaceutical companies in 2008 after a former employee received secret information from a doctor about problems with the new alzheimer's drug.
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the government said sac shorted the drug company's stock before the public announcement of the bad news. but now, .certainly sac trading records are reportly indicating that the hedge fund did not have a negative bet in place for the dug trial's disappointing results. sac had virtually no exposure. what happened here, guys -- >> that's not little. >> this is big. >> this is big. i'll tell you what happened here. in -- they did short the stock. but at the same time, they also had a series of equity swaps. 12 million equity swaps said they would long wyass in this case. and prosecutors, for some reason in the indictment, seemed to disregard that these exited. >> was ate an air traid? were they betting one value against another value? >> they said what's happening is we have these in place and they looked like they were not going negative, they were shorting from the stocks to get to zero in terms of to have zero
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exposure going into the announcement, which happened on a friday of what ultimately turned out to be disappointing bad news. >> that sounds like a technicality. in the end, they were cutting their -- >> they were absolutely cutting their exposure. look, it is still illegal of avoiding lowses in the legal world is the same thing as gaining profit. the question is whether this changes the dynamic in terms of what they were trying to do and maybe outline sort of what the defense will be. there was a lot of public -- >> but it sounds like it was a screw up of a technicality of a government case. they were reducing their exposure so they weren't going to lose their shirts on the whole thing. >> and by the way, the prosecutor is making a huge deal. they came out with the press conference and said they weren't just reducing their exposure, they were trying to profit tr all this. clearly, they were trying to profit by going lower.
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what this does, it's not clear it helps mask the case completely. because if he definitely still had -- or it looks like allegedly had that information. if he had information and was doing this, that's a problem. >> i change my mind three times in the last minute. i now think it's a big deal against sac. >> if there was six, if you think there's the case against steve cohen which has not been brought and is being investigated, if you think all investors have that circumstance against him, this makes that case weaker. why? >> because it ultimately says that when the trades were made, they were just reducing down and looked like they were trying to get to -- >> hold on. here is the thing. the map on the shorts that were put in place were literally the exact match to the swap such that they were literally trying to get to zero. that may actually change the dynamic in terms of the conversation. >> can you tell there should be no difference morally or legal
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by -- >> no, but you know what happens when you're a reporter and you make a mistake and you're reporting, it hurts the overall story. it may be the very beginning, but -- >> hold on. if you believe that there's evidence that steve cohen actually had the inside information, by the way -- >> none of that is -- >> but it's over that. even so -- >> but then it change the equation as to why were they getting neutral ahead of this thing as opposed to going short. and it changes a little bit of the optics of what's going on. by the way, worth note b, the redemption deadline for sac is in the next couple weeks. so a lot of people are trying to figure out whether steve cohen is going to be indicted or move forward or not. maybe this detail changes some of the dynamic. >> there's inside information on -- >> i'll give you one last side to all of this. this is the completely cynical view. they have these swaps in place.
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it's much harder to get out of an equities swap than it is to simply dump or sell the shares the way they were doing through other things. when you have an equity swap, you have to call up the counter party of the bank and said i want to get out of this. a lot of people if you have an equity swap find out about it. if you were trying to do this all this under the cover of darkness, it may be that you just decide i'm going to leave the equity swap there and i'm going to offset it. if you're a prosecutor, i could come up with 20 different stories, but that's a little bit of a -- >> and you were reporting on this yesterday so we can talk about it a little bit more. >> absolutely. steve cohen news on a monday morning. gasoline prices, as you've been at the bump, you know they've been roaring higher wins again, setting a new record for this time of year. joining us right now, is john hofmeister, he's the founder and ceo for citizens for affordable energy. john, i know there are a lot of reasons that you could see gas
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prices moving higher. but, rel, when you talk about it, there's more .more nfrg that's being found, more and more that's being pumped. what do you think is the cause behind this? >> this is the fifth year in a row, becky, that we've seen this early year rise in the crude oil price followed by rise necessary gasoline price. and what it amounts to in my opinion is while we have seen increases in natural gas production and in liquids production and in oil production in this country, it's still not enough to make a material difference on the supply side. and so we're still depending upon imports. and, really, we really have to go in a different direction for a solution to get out of this trap. >> what do you mean? >> well, this is a trap for the consumer because all the new people back in the job market, they're going to be paying a lot more for fuel. that's unfortunate. what we have to do is we have to introduce competition into oil and gasoline and diesel through
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natural gas for fuel. we have got to step up the activity. trucking is really starting to move along now with compressed natural gas. >> are you talking about like the boone pickens plan? getting on board with this? >> the pickens plan, the compressed natural gas, the liquified natural gas which is being developed by pilots across their chain of stations, truck stops. but we still have to get to the consumer. that is the light vehicle. what we can do there is turn natural gas into methanol because we're never going to have enough ethanol from biofuels to make a material difference again gasoline. >> are you advocating for government money being spent to push some of these program.snes. >> no. na da. we can invest in this. this is for the entrepreneurs in the marketplace of a 100-year-old market. we can start turning natural gas into methanol, displacing foreign imports. because the price that we're
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paying is really controlled by opec. and didn't we notice in december, saudi cutbacks, oil production. and there's no information that they're increasing oil production. because they need a certain price. that is the problem with opec. they all need a certain price and because our liquid production in this country is not going to displace that much opec oil in the world, we need competition for fuels. >> how do we get there? the markets have this incentive. understand what you're saying and doesn't seem to be able to get there on its own. >> well, there's a group of us called the u.s. energy security council. we're calling on members of congress. we need an open fuel standard. there's a bill that was introduced in the last congress. we want to see it introduced in this congress. an open fuel standard bill which puts more flex fuel vehicles into the marketplace in the u.s. just like in brazil, just like in china, so the automakers now how to make -- >> we're going to run out of
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time, john. gives a website where people who want to look into this can go. >> usesc.org. >> okay. >> i'm watching the weekly data on oil production in the united states. it's up a million barrel a day in the last week. if we sit back and let the energy sector do what they're doing, isn't that going to solve a lot of the problem? >> it depends on which year. oil is will go wherever people are going to buy it and we could end up exporting oil from this country which doesn't help the consumer. that's why i'm advocating competition for fuel. >> are you advocating not exporting our energy? >> no, no, i think that -- you know, it should be an open free market, but competition for oil could be a changer.
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>> coming up, the most watched and rewatched ads from the super bowl, coming up next. ♪ ♪ ♪ ♪
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welcome back. some of the world's top brands she would out $4 mlt for a 30-second spot in the super bowl last night. who is watching the ads, who is replaying the ads? last night, my wife and i were going back 30 seconds, 30 seconds. some we were crying. what were the most popular ads? >> actually, all the top ten ads were funny.
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the most popular is from taco bell. >> with the older? >> the older group. >> i thought that was a great ad. >> i thought it was, too. one interesting trend we saw this year that's a replica of last year, is that the ads that were previewed online last year were wondering, well, they were previewed. are they still going to do well on the air? eight of the top ten were shown in advance. >> does showing in advance actually matter? >> it matters, it helps, as it turns out. another interesting thing, three of the top ten ads had some user int interaction. >> what does that mean? >> with doritos, they were both user generated and consumers voted on the ads. with the audi ad, the ending was pecked by consumers. >> that was a good one. i'm sorry to interrupt. basically, that's the trend all the time that people tivo the funny ones and they don't necessarily go back and tivo the emotional ones. >> we find people tivo the game, they go back, rewatch.
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over the past few years, we've seen even been humor, animals and is, of course, that's the top two. >> what's the most rewatched ad? >> this year, taco bell. >> and people literal hi stopped, like we did, and pressed pause and said, come back in, you have to watch.it. is that what we're talking about? i can't predict what's going knot home, but that was the most watched going on. >> that and godaddy, the sound of the kissing grossed me out. >> did we get more on this one? when they started making out -- >> it was incredible. >> it was a nice way to move it forward for godaddy because dan na patrick is kind of stale. but i don't think i'm pausing for the natural sound here. >> wow. wow. >> it really, really was tough. >> i watched that one online beforehand. >> wow. wow. these all i've got to say. >> it's terrible. >> did the blackout make people want to tivo more?
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>> what we saw was a huge spike at 10:00 eastern time. we're thinking that -- we're trying to analyze what might have happened, but maybe if you were watching something else, you came back at 10:00 and the game was still on. >> how many more ads did cbs get to run savrlt of the blackout? >> we know no advertiser suffered in that the three ads that were played during the blackout reaired so they got double exposure. >> and was that a thank you for your business, we hope you'll advertise with us throughout the year? how does this work inside the cbs empire? >> i don't know if they would refer to it as possibly a make it or perhaps someone in the studio decided to hold back those ads, understanding that they wouldn't get the value during the -- >> there were xhevents from social media that cbs does not sell contingency ads and it was a missed opportunity for potential revenue. i don't have that confirmed about should they have sold some as a backup to fill. >> do they traditionally do
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that? >> i don't know. but there were obviously fewer commercials than they would have been in that break. they stayed on programming a lot. >> pepsi obviously had beyonce. but i don't think they did enough with her. >> during the halftime show? >> no. during the halftime show, clearly. but i'm saying with the other ads. >> well, you know, pepsi did come in at a number of -- >> in the break. >> and that's pretty good. coming in as the top ten. maybe they felt beyonce had enough exposure during the halftime show and tried to use other tactics. >> do you have a personal favorite? >> wall, the personal favorite is the same as your wife's, even though it came in at number 12, it was clydesdale. >> did you cry, andrew? >> after we play dollars it for theed this time, i got close. really? >> joe is not here, so i figured i'd fill that void just a little bit. >> brian, i thank you for being here. we're going to see you right after the break and, tara, thank
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you for explaining all of this. you are like the new nielsen, basically, right? forget about nielsen. they know more than the nielsen guys do. >> different. we're measuring what's really happening. >> okay. coming up, dow 14,000. we're going to talk about the next market milestone for the bulls, right after this break. well, technically i work for one. that company, the united states postal service®, works for thousands of home businesses. because at usps.com®, you can pay, print and have your packages picked up for free. i can even drop off free boxes. i wear a lot of hats. well, technically i wear one. the u.s. postal service®, no business too small. [ male announcer ] how could switchgrass in argentina, change engineering in dubai, aluminum production in south africa, and the aerospace industry in the u.s.? at t. rowe price, we understand the connections
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standing by for capture. the most innovative software on the planet... dragon is captured. is connecting today's leading companies to places beyond it. siemens. answers. welcome back, everybody. our guest host this morning, ed, rebecca and barry knapp. guys we've been trying to figure
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out over the last hour who's right. because i think you come down to it, you two, rebecca and ed, you guys are thinking that yeah, it's not too late to get in the beginning. barry you're concerned that there is time for a pullback at this point. that maybe we've gotten out a little too far. >> well, last year was very similar. we thought we'd have a decent year but we got something like 90% of the returns in the first month. then we had a growth-related pullback. so we had an earlier guest on talking about high dividend paying stocks. we've been talking about stocks with bond-like characteristics. and while we've written a lot about the limits of fed policy and what it can do for macro economic real growth, and the markets, what it surely does is make fixed income assets more expensive. so the parts of the stock market that look most like the bond market have been benefiting from this for two years. and we think that they'll continue to do so, as money gets forced up the risk continuum. middle ground as that previous guest described, we think that makes sense. right here, given what's likely
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to be the trajectory for growth. >> so you think you're going to go from bonds to dividend yielding stocks? >> that's what's been going on for some time. >> but i'm just wondering whether that -- may not be momentum. it feels to me like there's a potential for a melt-up. i could be completely wrong. >> that doesn't mean we don't get a pullback, right? >> yeah. >> you can get a pullback along the way with ray rally. when we think about this year versus last who knows what will trigger the pullback. italy's elections, something else. but there are some differences. europe, broadly speaking, is a lot healthier this year than it was last year. there's a lot more central banks in play right now. i mean you look at japan. we've got carney speaking to the government about the bank of england thursday. he said he might be more willing to embrace inflation there. so there's other factors that support the rally. >> i really want to know from you guys, do you see government spending cuts as a positive for the stock market or a negative? >> they're a negative. but not as negative as the tax
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hikes. so, i do think that the fiscal drag is not pencilled in, but i'm far more worried about the tax hikes -- >> i think you're absolutely right in terms of that. i don't think the defense spending cuts, even though could have been a quarterly anomaly for the timing, this is our future. this is where we're going. >> if you think real gdp and strip out government spending at the federal, state and local level, it's been going 2.5% to 3% since the mid 2010. the private sector's actually doing reasonably well, i really don't have a problem with a slowdown in government spending. >> to your point earlier, steve, a lot of things we're talking about, ceo confidence, clarity, if we get through this spring and washington actually gives us a road map it's going to be painful. and i think what they do matters. but at the end of the day, if we know that playing field we've got in front of us, and we can see the lights are on, maybe that will all be at the margins. >> this is our argument for capital spending related parts of the market. when you look at the cyclical parts. i would argue that anything
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related to the consumer is overpriced, people are overly optimistic about it. that's where the pullback comes. but the capital spending related parts of the market, like enterprise tech, for example, storage, software, services, the numbers got marked down. the part of government policy, public policy uncertainty that impairs capital spending, i think the worst of that is behind us. the part where the consumer gets impacted by the tax hike, that's in front of us. >> you're talking about a sector rotation more than a big pullback. >> well, i am. but, yes, the market gets ahead of this growth dynamic. >> -- could be a correction. actually part -- >> healthy. >> guys, thank you very much. ed, rebecca for joining us for the last hour. barry is staying with us for the rest of the program. great to see you both. >> thanks. >> coming up one of the most accurate forecasters on wall street, even though he lives thousands of miles away. ian sherderson is going to join us with his latest predictions. [ male announcer ] you've climbed a few mountains during your time.
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a "squawk" super show. barry knapp, jim paulsen and ian shepherdson talk today's lineup. dow 14,000 and when this market could see a new all-time high. >> dell's deal to go priet. >> dude, you're getting a dell. >> an announcement could come as soon as today and we're going to discuss mergers and acquisitions, computer conso consolidation and private equity. >> light's out for the 49ers. the baltimore ravens are world champs. we have the highlights and the low lights as the second hour of "squawk box" kicks off right now.
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good morning, welcome to "squawk box" on cnbc. i'm andrew ross sorkin. take a look at the futures. see how the market is setting up this week. dow looks like it will open up above about 44 points. s&p 500, almost off five points and the nasdaq off about four points. on friday the dow closed above the closely watched 14,000 level for the first time since 2007. now just 154 points from its all-time closing high. dell expected to announce a deal perhaps as soon as today to take the company private. we're going to keep our eyes on that mn dan primack is going to talk about this deal and whether or not we're going to see more consolidation in the computer industry. steve? >> thanks, andrew. some other stories, here are your morning headlines. japan allied saying it will talk
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to boeing about compensation over the grounding of the 787 jets in its fleet. the carrier says the problems which have kept the dreamliner on the ground will cost it nearly $8 million through the end of march. two pension funds are suing asset manager blackrock charging it with, quote, looting securities lending revenues from the firm's i-shares exchange traded funds. blackrock says the suit is without merit and that it will vigorously contest the charges. and this year's super bowl will be remembered nearly as much for a midgame stadium blackout as for the exciting ending. power went out for 34 minutes, interrupting the third quarter. the outage was blamed on an abnormality in the stadium's power systems which triggered an automatic shutdown. the ravens beat the niners 34-31. >> steve, thank you very much. other huge store very is the dow closing above 14,000 for the first time since 2007. but with earnings season winding down and a budget battle looming in washington, the question is, could this rally be put on hold? joining us right now for the
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rest of the show is ian shepherdson. he is chief economist at pantheon macro economic advisers. barry knapp is our guest host. he's been with us for the last hour and stays here. he is the head of u.s. equity portfolio strategy for barclays. and jim paulsen is chief investment strategist at wells capital management. gentlemen, welcome to the table this morning. you know, ian, i want to talk a look back at what happened with friday's jobs number. we came out with unemployment ticking higher and that's when the market really seemed to take off and headed right past 14,000. what gives? >> well, i ge it's a story that if unemployment is not coming down as quickly as it was or even as it did friday going up a little bit then the fed is just going to keep easing and qe continues indefinitely. this is important because a few weeks ago we got the minutes of the december fomc meeting. there was talk about how the fed might stop before the end of the year or the middle of the year, but i think those numbers helped to push that idea back. >> jim, your take, i know that you've been very positive and very constructive on what's been happening here.
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you think that the markets will continue to push higher? you think it's because of the fed or something else happening? >> well, you know, i think a little different take on friday. that was a great job number. from where we were in december to where we are now, we created another 700,000 to 800,000 jobs with the upward revisions from march to march, 34,000, and the upward revisions from last three months. i think it's more about economic momentum. one of the things that's happening this year is that we're constantly forcing people to revisit how fast we're going to grow this year. i think most people are sort of leaning towards revising upward their growth estimates. and i think that confidence is feeding through the stock market more than anything else. i don't think it's about the fed. i think it's about the economy not only here, but in china, in europe, in japan, coming out better than we feared, just 30, 45 days ago. >> barry, how do you come down in the middle of that? the economy too hot?
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too cold? worries about the picture for the jobs market? >> well, i would say that on the corporate side we think it will get better through the course of the year we've been saying we think the worst of the public policy uncertainty and what it means for business confidence is probably behind us. not going to get better that fast. but it will get better. but we're worried about the impact of tax hikes. i would take issue with respect to economic momentum. expectations have run hot and heavy. there is a little pending issue here in europe, as well, which is the move in to europe. we've got the bank of japan in mega ease mode. the fed obviously expanding their billion sheet at a trillion dollar annualized rate and seb is odd man out of this global liquidity pump and the euro has made its way up to $1.36 and change. >> right under that. >> if that's $1.40, $1.45. there's lots of concern about what that means.
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>> that's a really interesting question one we have not talked about -- that is not one we've talked much about around this table with the yen and everything that's happened there but the euro in particular. >> there's no free lunch from any of this monetary policy easing. yes, you can push pin nation up a bit. you can push nominal gdp up a bit. but to get real gdp going you really do need business confidence, corporate confidence to imroffe. so we think that can happen in the u.s. our problem is, though, we think that there's some still weakness as a result of the tax hikes before we get to that stronger momentum that we think will be there in the second half of the year and into 2015. >> and you were also pretty downbeat on the jobs report. you saw temporary health negatives. i was encouraged by the 200,000 plus on the private sector. but you're saying -- >> not necessarily wrong. just nervous about the short-term. and i've got to say when i look at things like the nfib, the small business hiring number, that's very weak. it chimes with the drop-off in consumer confidence. >> hasn't that been weak?
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>> -- big hit after the election. >> didn't it kind of miss most of this rebound -- >> if you look at the nfib and compare it to the revised payroll data that we've got now there's a much better fit than there used to be. >> the revised payroll data was higher. >> the revised payroll -- >> says how terrible things are. >> he always says it's horrible. >> it is horrible. >> are we reading him wrong? >> relative to large business sector small guys are in a terrible mess. they've weakened the last couple of months probably because they're scared of the payroll tax hike. and their hiring number has slowed down. we have upward revisions for q4 and then we had a weaker number for january and the nfib says it's not going to get any better could get worse in the short-term. i'm fully on board with the second half strength story. >> but you're the opposite. what i -- >> no, no, no. i think the same.
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>> i think the next couple quarters are going to be much weaker. >> what's the chance that people listen to you, they don't get in the market now, or either they take a little off the table or they do something and still runs away because frankly everybody's so upset -- >> if we got into a period of extended multiple expansion that lasted for more than a six to eight-week period it would be the first time in 70 years it happened before the fed started normalizing policy. when the fed has negative real interest rates -- >> what are we on multiples now? 13, 14? >> 13.25 time s forward, 15 tims trail and we are towards the higher -- >> you're saying the market never expands its multiple before the fed begins a tightening cycle? >> it does off the bottom. right, when we go into recession and then we come out. but to get into an extended period we've gotten to -- >> it would be very -- >> we've got to 20 p/es three
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times in the last 70 years when real interest rates -- >> barry, last year, last year the trailing multd imlast year at the end of 2011 was about 13 times, it ends up the year about 14.5 times. we had a 15% multiple gain in 2012 and i think that's continuing as we go on 2013 here. i think a big thing that is going on is confidence is improving. and as it does, you're seeing that go right in to higher valuations for the stock market. i don't think we're waiting -- i don't think we're waiting for the fed to tighten before we're going to lift valuations. i think it's happening right now. >> what i will say is we now have had three market strategists who we've spoken with in the last hour, who have talked about this idea that the fed being in there and continuing to stay there with these low rates that's part of the reason they think the market is so bullish which tells me there's got to be a significant portion of market players who are thinking the same thing.
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when you get to the point where the economy actually the numbers are really strong and no one's arguing that things are looking better and you start to worry about the fed moving at that point, what happens to the market then? >> well i think for one thing, becky, by the time the fed exits the economy will be better. and confidence in the economy will be better. >> but i think -- or does the market have a momentary whoa wait a second the punch bowl is getting taken away for the first time in years? >> well, we certainly could have a correction, or a pause. we're starting the process of exiting the great monetary unwind is already beginning. the debate started really -- >> jim you're being too modest. you think the fed ought to be doing it now. you think they ought to be taking away. >> i do. >> whatever the emergency part of the punch bowl is. >> well i don't understand, you know, clearly there's a lot more, you know, we need in the economy. we need faster growth, we need lower unemployment. but there is no longer a crisis
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in the u.s. economy. we've come a long ways from where we were in 2008 and ''09. the only thing left in crisis, steve, is the fed. there's still emergency-like -- >> should the fed bring down $85 billion to $45 billion, should it stop qe'ing altogether? >> i think it should start to announce it's going to normalize economic policy, remain accommodative but start to normalize it because it's recognizing the economy is no longer in crisis. and i think that they could actually lift short rates a little bit. they could bring down qe as a approach -- >> we have a trembling economist on set. a trembling economist. >> i think if -- i think it would raise confidence among -- >> you think it's a bad idea? >> i think that would be just calamitous. it's not the end of the world like it was in september 2008. we still have a real-life crisis and the fed cannot step away
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yet. >> we've talked a lot in the show about signal value of the fed. i think both guys are right. i think that the fed's saying we're not in crisis anymore, have a huge -- >> i think becky hit a key point which is -- >> bad 1994. 2004 after they pulled a considerable period you had a 10% correction. you never make that transition smoothly but that's a major buying opportunity. >> and everybody will say jump in if you see that. jim, thank you very much. >> thanks. >> coming up next, a deal for dell. how close is a deal and is $23 billion too much to pay? we ask private equity deal watcher dan primack next. follow the show on twitter. send us your thoughts.
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welcome back, everybody. the futures have gotten a little weaker through the course of the morning. the dow futures down by about 45 points below fair value. s&p futures off by about five points. this is coming after five incredibly strong weeks for the market.
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and coming after friday when the dow officially crossed above 14,000 for the first time since october of 2007. got a few individual stocks today. research in motion will officially take on a new name and symbol today. it's going to become blackberry. the name and the ticket symbol, those change also be effective before the open. for the detail oriented viewer it is worth noting that the rim name doesn't completely disappear until shareholders approve the change at the annual meeting which usually takes place in july. but it's going to start trading today under the new symbol bbry. shares of herbalife getting hit this morning. "the new york post" is reporting the company is the subject of a law enforcement investigation after a freedom for information request revealed 192 complaints were filed against the company over the last seven years. those complaints suggest false promises made by the company as well as difficulty distributors had in collecting income and getting refunds. some of these complaints, by the way, were made months and years before pershing square's bill
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ackman made his accusations against the company. big leveraged buyout news we've been tracking the dell story over the past few weeks. dell nearing a deal with private equity firm silver lake partners to sell itself to a buyout consortium. that will allow dell ceo michael dell to take a majority stake in the company while silver lake and microsoft would hold a minority ownership. it could come today. it might come tomorrow. we will see. joining us now to talk more about the deal is dan primack, senior editor of fortune. good morning, dan. >> good morning, andrew. >> "a," do we think this is going to happen? and i will stipulate that when we last spoke i think both of us thought the chances of actually getting as close as we seem to be right now were far, far away. >> yeah, i think i put it at 20%. so clearly -- then again i also thought the niners were going to win last night. i would say this, i mean, look, i don't think it's necessarily ever a great sign when things keep getting delayed. first we heard over the weekend, then today, now maybe tomorrow,
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maybe wednesday. looks like there's going to be an agreement. i'm going to be really interested in what the per share price is. because we keep hearing between 13 and 14. the stock's already trading over 13 and i know that's kind of baking in the buyout, people have been hearing about it. but it was around 11 when the first reports came out. at 14, that's a decent premium to where it was. you know, kind of 26%, 27%. but not an extraordinary premium to where it was. >> can you make the math add, by the way? one of the things that strikes me about a transaction like this is typically private equity goes into a deal, they say they're going to kick out management, change strategy, do all sorts of . this is not that, right? they're keeping michael dell, not really changing strategy per se. how does it all make sense? >> not only are they keeping michael dell, i don't think, and we'll see the finals when there's the specifics, it's possible they can't get rid of michael dell unless michael dell agrees to go which is extremely unusual. and i almost wonder if the math makes sense here. that eventually the way silver lake and maybe even microsoft get out of this eventually is by
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selling to michael dell. and you know, he gets control at the beginning and he just keeps amassing control as it goes on. i don't see another way out necessarily for silver lake. so maybe that's how it works. the two things we didn't know two weeks ago, andrew, one was that microsoft might put in $2 billion. that was a huge equity gap that they fill. and michael dell obviously has billions and billions of dollars he can put in and apparently he's willing to put in all that money in addition to his own shares roalding over. >> stay where you are. let's bring in the equity analyst at morning star. does this deal make sense to you? >> no, i think it does make a little bit of sense in terms of really low-key ratios of which dell's been trading recently. if you look at the software to hardware mix, it's not too great right now. dell spent about $10 billion in the last couple of years. much higher margin sales company. so it's able to continue to roll those out and grow those. you might see once dell goes
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private, if it can come back to the table at a later date, an ipo again at a much more attractive margin, you might see its multiples go up and silver lake make quite a bit of money. >> how much if any of this at all is about the cash on the books of dell? all of these big tech companies and a lot of companies in general have a lot of cash in them. and it's just unclear to me how the market should be valuating that cash? dan, go ahead. >> i was going to say i think it matters in the sense of this deal includes about $15 billion in leveraged financing from the banks. i think the cash matters because a lot of that cash is most likely being used as collateral for that financing. so it's making the banks much more comfortable than they otherwise would be. >> and having to bring that money in from abroad. a lot of this is foreign money that's going to get taxed on the way in. >> we'll see how they ultimately do it.
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you technically could set up offshore or european holding companies essentially, to use those for collateral. we'll see how the structure -- >> when i look at 13.70 how much of that is cash? >> what do you think? >> i think it's about 3.73 net cash position per share. which is not too bad. >> that's insane. isn't it? >> carr if you're a debt holder at dell you're an unhappy camper today. >> you're definitely not going to be too happy to see the degree of leverage that it's going from. it had a really solid balance sheet and definitely the degree of leverage that it's going to happen today gone is not going to make you the most thrilled person in the world for sure. >> last question, because we got to go, why can't they still do whatever they think they're going to do in private, why thant kay do it in public, i'll ask it to you dan? >> they could. honestly i think a big part of this is michael dell not wanting to have to deal with analysts every quarter and going on cnbc every quarter to explain himself. he doesn't have to do that anymore.
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he owns the company. why not? >> dan and carr, thank you for that. michael dell if you're watching we still want you to come on every quarter. we'd like that. see you guys. >> i can't wait to talk to you at the break andrew about 40% cash in a company. taxing times in the cornhusker state. nebraska is the latest state to consider ending the state income tax. could your state be next? we speak to the governor about his proposal and what it means for business and consumers. at 1:45, the aflac duck was brought in with multiple lacerations to the wing and a fractured beak. surgery was successful, but he will be in a cast until it is fully healed, possibly several months. so, if the duck isn't able to work, how will he pay for his living expenses? aflac.
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like his rent and car payments? aflac. what about gas and groceries? aflac. cell phone? aflac, but i doubt he'll be using his phone for quite a while cause like i said, he has a fractured beak. [ male announcer ] send the aflac duck a get-well card at getwellduck.com. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪
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still to come this morning the buzz from the big game. brian shactman's going to bring us highlights and social media reaction. up next, solid earnings from many of the banks. analyst dick bove has two names you may not want to put in money right now. right now as we head to another break take a look at some of the top banks in the country. ♪ ♪ ♪ ♪ ♪ [ male announcer ] concept. calvin klein underwear. 360 seamless technology. we create easy-to-use, powerful trading tools for all. look at these streaming charts! the toomizable
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welcome back to "squawk box," everyone. in our headlines this morning, a notable day for dow component mcdonalds. the company is introducing its first new happy meal in over a decade this week. this is a fish mcbites meal and comes with seven pieces of fish, french fries, apple slices and a drink and it is just in time for lent. also former customers of bankrupt mf global may be able to fully recover their frozen cash. that projection is based on the latest assessment of recoverable assets available versus pending claims. and humana is reporting $1.19 a share, 13 cents better than the street was expecting.
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however revenue did fall a little short of consensus. steve i'll send it over to you in >> banking analyst dick bove out with bold new views on the industry. he joins us from tampa this morning. dick, thanks for joining us. give us your view on the big banks right now. >> well, i think it's superb. why don't i give you a few facts first, right? in other words in the last 14 quarters, which is 3.5 years, bank earnings have gone up every quarter, year over year. in 2012, bank earnings were up 22% if my estimates are correct, to about $145 billion. $145 billion would be pretty close to the all-time record in terms of profits for this industry, and in the fourth quarter of 2012 the industry properly earned $39 billion and it's never in the history of american banking earned $39 billion before. this has all happened in a period in which the banks have been forced to deleverage their balance sheet, get rid of their
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increase their cash holdings, write off $800 billion worth of bad loans, deal with price fixing from the government, deal with regulations coming from every sector. the housing industry busting. so, you know, all of the theory that you hear stated over and over and over again concerning what's happening in banking, just doesn't fit with any of the facts as it relates to this industry. >> i don't cover bank earnings or stocks but i do get to cover is bank regulation as it comes from the fed, the fdic. so my contact with bankers is almost exclusively then grousing about the new rules coming from washington. are you telling me i should discount that grousing? >> yeah, i think you should throw it right in the garbage where it belongs. if you're a stockholder. if you're interested in buying stocks, what you're interested in is the earnings of these companies going up. will dividends of these companies go up? will the stock buyback programs go up? and the answer to all of that is yes. you know, in 1959, this industry went 26 years of up earnings.
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in 1989 they went 17 years of up earnings. we're suggesting that you can replicate that over the next few years. >> what i'm interested in -- >> the average cycle -- >> is whether or not we created a structure of regulations that make it, two things. one, too hard to make money in the banking business, which i think you're saying is untrue. and, two that curtail lending. are either of those things true? >> clearly it's incorrect to argue that the structure that's been put in place is stopping the banks from earnings money because we're talking about regular earnings, right? we're talking about $145 billion. that's not a small amount of money. is it curtailing lending? absolutely. for a period we have the fed, if you will, increasing this reservoir with money or water and we turned off the pipes, which are the banks, which would get that money to the economy. those pipes are being turned on again. and that money is going to get to the economy. so these banks are going to go through year after year of more record earnings, you know, ahead
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of them. you know, if you had purchased bank stocks in -- we weren't very positive on this industry after having been negative for a number of years. right after the bear stearns collapse, so let's assume that you started buying bank stocks, you know, in april of 2008. way before the financial collapse and you bought them at the same amount of money every week for the last four, four and a half years. you actually made money in virtually every major bank in the united states. you beat the market if you bought u.s. bank or you beat the market if you bought state street. you almost beat the market if you bought jpmorgan and wells fargo. >> hold it right there -- i thought it was interesting, this is barry knapp, you mentioned 1959 as your starting point for a long duration of positive bank earnings. >> right. >> before you got to 1959, though, you had 15 years where bank rfrkt o.e. was cooped at
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15%. a huge percentage of bank assets in government securities after world war ii. that's the way financial repression was implemented when the world was monetizing world war ii debt and bank relative performance through the fifty was was terrible. the worst performing group by a long shot. in the '60s things started to loosen up a little bit and you got your much stronger period. so i think the negative argument clearly is that r.o.e.s wind up being capped because of all this regulation, and excess capital in the system and then we have a period like the '50s where they lag significantly through the uptrend. have you looked at that period? >> yeah, of course. but i've also looked at the period that started in 1989 in which bank earnings wedges ups 17 years in a row. you have to take a look at both periods. but think about the last four years. what has happened in the last four years? you have had virtually every negative development that you could throw at this industry occurring, and yet in that four-year period in which you were shrinking the size of the balance sheets, in which you were doing all the things that i
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mention a few moments ago you went to all-time record earnings. so there's something wrong with the analysis of this industry, if all people can think about is looking at the 50s, and not looking at what happened in the last four years, when earnings were breaking through to all-time records. people are not analyzing banks correctly. >> i know you love them all, but just give me one or two that you don't love so we know. so we know what not to -- >> look, look, andrew, when the bank starts to go up, they go up as a group. it's one start with a bunch of different names. to argue xyz bank is going to do poorly when the rest of the industry is going to do well is to argue against the history of the industry going back 50, 60, 70 years. if bank stocks are going to move up, they're going to move up. if they're going to move down, they're all going to move down. no bank goes up when the bank starts going down. virtually no bank goes down when bank stocks are going up. you should be buying. goldman sachs.
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you should be buying bank of america. you should be buying u.s. bank corps. you should be buying comerica. you should be going up and down the scale and buying these stocks because what you're going to get is what you've gotten for the last four years which is continuous up earnings, increases in dividends, higher stock buyback programs and record results. >> is the fed going to let bank of america pay a dividend, share buybacks? >> i think they will. but i could care less what the fed does. the fed has sat there and i'm a big bernanke supporter but i' they've cut interest rates to a level which is crippling bank earnings 20 some degree and crippling the economy. back before they started cutting interest rates, 19.5% of the income in the united states came from passive sources. that's now down to 12.8%. that means they've just taken away a staggering amount of money from the elderly population in the united states, and put a whole bunch of them on food stamps, and they think they're doing it because they're going to get something in return, i.e. more bank loans.
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they didn't get the bank loans. they just took the money away. plus the second thing they're doing with this ridiculous interest rate policy is they're diverting funds to areas of poor return. lenders are not going to make five-year loans unless they're on junk bonds. you've got the lenders lending 60, 90, 120 days because interest rates are so low and you've got lenders putting money into young bonds. in terms of putting money into long-term projects that are going to generate income, they don't do it because interest rates are so ridiculously low. interest rates are going to go up and that's going to help banks and the economy. >> dick, i'm sorry, we have to leave it there. i think we need to have you back to talk about the effect of fed policy on the banks. andrew? >> i think we do. i just want to get to morgan stoply but that's another issue. you saw the chart, red arrows and one green arrow. coming up next, getting rid of state personal income taxes. nebraska's governor is going to talk about his proposal. why he wants it gone and what it means for business in the
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cornhusker state. and in the next hour, the "squawk" version of the killer bs. bianco, bogle and black. .
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welcome back, everybody. the cornhusker state is trying to join the ranks of seven states that don't have income tax. greg heineman is the governor of nebraska. he joins us now with more. governor, good morning and thank you for joining us. we know about your plans to eliminate the -- both the personal and the corporate income taxes. how would you make up for that lost revenue? >> well, the way we try to make up for it is we grant $5 billion in sales tax exemptions, primarily to business, and i'm talking to the business community, if you'll give that up we can get to a tax-free state in terms of eliminating the state income tax, both individually and corporately. we'll be more competitive for jobs. the states that are growing the fastest are those without an income tax or a very low rate. >> so it simplifies the tax code. it doesn't necessarily transfer the burden but it does simplify the code? >> there's no question it simplifies the code. it would be a fairer code,
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because you'd have fewer exemptions and we'd be to a low rate. and hopefully that would be the total elimination of the state income tax. >> what would the state sales tax? what is it right now and what would it be after this plan? >> the state sales tax right now is 5.5%. that would not change. because, again, what we're asking is let's give up those exemptions we've granted over the years. they were done five decades ago. >> hmm. what do the statistics, or the studies that you've run show would end up happening in terms of the revenue that's brought in? >> well, there's no doubt in my mind we would grow more rapidly. that's shown in every study i've seen in states that are doing the best economically. don't have an income tax or again they have a very low rate. we have the 35th highest personal income tax rate right now. i'd like to change that. i think small businesses understand that in particular. >> we have spoken with business leaders who have told us exactly that on this set. barry stern was here last week as one of our guest hosts and he
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says the best states to do business with are florida and texas, two of the states that don't have income tax. where would you be looking? have you talked to business leaders from outside the state, and has anyone said that they might actually relocate to nebraska as a result? >> i haven't had any specific conversation, but every time i'm competing against another state the very first question is about tax rates. so i know this is a key issue. it will help with retention, it will help with talent. there's absolutely no question that it will make a difference. >> governor, andrew sorkin here. question, what woo be the additional hit in terms of revenue that you would take to make this tax cut? >> well, what i'm trying to do is make it revenue neutral in the sense that we'll collect the same amount of revenue because, as you know in government we have to count using a static model. the fact of the matter is, i believe it will spur economic growth, we'll actually collect more revenue. >> is this something plan that you think will get passed? what's been the reaction so far
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from the rest of the elected leaders in the state? >> well, it's the discussion we need to have. i can't guarantee it's going to pass. i've had two reactions. number one a lot of people come up to me and the business world and say well i'm all for it but i got to keep my special exemption. and i say no, no, you can't have your cake and ice cream both. and i have citizens who say why don't you just eliminate all of the exemptions and in addition to getting rid of the income tax, you could also lower the sales tax rate. so we're going to have a robust discussion. we're willing to consider all those alternatives. but at the end of the day, i want to create more jobs and higher paying careers in my state. >> which i suppose is behind your reason for going ahead and approving that new pipeline road for the keystone xl pipeline. what needs to happen next from washington? it's now in the president's corner. he needs to make' digs. he's indicated that he'll do that by the end of march.
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i hope he does. i hope he approves it. it's time to move forward. >> governor, steve liesman. i know this is essentially not your problem but one of the criticisms of what you're doing is that we end up in a state by state race to the bottom. in terms of not providing essential government services, and had how one state out-competes another and ultimately ends up really in a race to the bought up. what's your response to that? i don't agree with that at all. i said we're revenue neutral. we're also budget neutral. we have to have a certain amount of revenue to fund education, public services and health and human safety. we're not willing to do away with that. i'm willing to compete with any state in america. i'm willing to compete globally. i just returned from china about 2 1/2 months ago. that's the economy we live in today. if i go back five decades ago we competed regionally and nationally. today we compete nationally and internationally. it is a global market. so, i think most governors
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understand that. >> governor, no question it seems like it makes sense to have this discussion about eliminating the loopholes that are there now, trying to simplify the tax code but we did just have someone write in on twitter who lives in washington state who says be ready for 9% sales tax like we have in washington and it goes up every year because that is a place where they've eliminated the income tax. what's your response? how do you make sure that doesn't happen? >> we believe in this very nominal financial concept that washington, d.c.'s never heard of, and some states. we don't spend money we don't have. and so we stay out of that trouble. we've always balanced our budget. we're not going to get into the same predicament as others. we've had a strong cash reserve, we'll maintain that. for when we face those tough economic times. >> governor, this is barry knapp. i saw our governor here in new jersey speak about a year and a half or so ago asked about getting new corporations to move into the state of new jersey and he described new jersey as having the highest property
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taxes in the country, highest estate taxes in the country, and third highest income tax and said, for me to get these companies to come there is inkwlid difficult. where do you stand on property taxes and estate taxes and the like and how competitive do you think you'll wind up being relative to states around you, and i'm sure you'll be more competitive than new jersey for sure. >> well sure, you're right. maybe that's not much of a hurdle. i tell any company currently operating in new jersey if you want to come to nebraska, give me a call and i'll talk to you and see what we can do. we just five years ago we eliminated the state estate tax. we've eliminated the marriage penalty in the income tax system. every year i'm trying to make us more competitive in terms of taxes, because it does make a difference. i chaired the national governor's association last year. we did a series of economic sublets and the very issue that we came to the conclusion was you need a competitive tax environment, a competitive regulatory environment in order
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to compete and that's the direction i want to take my state. >> all right. governor we want to thank you very much for joining us today. we hope you'll come back with an update both on what happens with the income tax, and where things stand with keystone. >> all right. thanks, becky. >> thank you. >> "squawk box" is on social. find us online and mobile too. follow the show on twitter @squawkcnbc. like us on facebook. visit our show page squawk.cnbc.com. and there's thousands of ways to communicate. coming up, the super bowl moment of the night. and it wasn't the play. brian shactman joins us with a hint. >> it was the flipping of a switch. making history in the super bowl made for one of the most dramatic games in its history. we'll have the highlights and low lights plus another look and see what's in commercials when "squawk box" comes right back. all stations come over to mission a for a final go.
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welcome back to "squawk." time to talk super bowl buzz. brian shactman is here to give us some play by play. keep the lights on. >> i was so jacked up in the 6:00 a.m. hour i want to go through a little bit more the flow of actually what happened for people who didn't see the game. >> is that like -- not like a lance armstrong? >> no, no. it's all-natural. you know, just straight endorphins. i'm a little soft in the middle these days, so listen. early on it looked like an absolute rout. joe flacco threw three first half touchdowns. he ended up the game mvp. there's a money angle because
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he's a free agent. he's probably going to get like a $1 mund million deal next year. after kickoff return to start the second half it was 28-6. and then, some people said the lights were out. and the lights literally went out. the blackout stopped the game for 34 minutes. as for exactly what happened. we don't know the full story as of yet. but it seems the utility company is not to blame, along with superdome management company sng. this is their statement. a piece of equipment that is designed to monitor electrical load sensed an abnormality in the system. once the issue was detected the sensing equipment operated as designed and opened a breaker, causing power to be partially cut to the superdome in order to isolate the issue, end quote. when the lights came on so did the 49ers. 31-29 they cut the score to. they had the ball inside the 10 with a first and goal, so they had four tries to score and could not. crabtree taking it to the end zone to make it a game but they would not get closer than two and baltimore wins for the second time --
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>> four bad calls. >> yeah. >> on the 5 yard line. that was my take. >> i think that they made some bad offensive calls and i think that they could have mixed it up a little bit for sure but they didn't and they didn't score. story lines. opinions on the ads. i knew andrew liked the budweiser clydesdale. won the ad meter on "usa today" when, of course, they say bring 'em on. and the horse gets in the parade. and he's sad the horse doesn't recognize him and the horse books around the corner and they have a hug. that's the way this one ends. listen, i don't know. it's nice he sees him and comes backing around. >> there's only one commercial that almost made me cry and that wasn't it. >> it was the troops one. >> the -- >> the jeep -- >> you didn't think there was too much jeep in there? >> you know what? that one totally got me. and that's just, you know, there's a seat here for you. there's the dinner. your favorite dinner waiting for you. >> i thought it was fantastic
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minus the -- >> i didn't think -- >> remember when they did the clint eastwood thing last year for chrysler. there was no real mention for anything, just show the logo at the end. >> i'm with becky, if you see any of the ads, anything when those guys come to the halftime of the basketball game and see their kid it totally gets you. the thing that i like the most and maybe becky and i appreciate this, the same sort of demo, was the audi one. because i thought it was a total send-off to sixteen candles. and also back to the future. it was just great. he goes to the prom by himself. goes up and kisses the prom queen and gets socked in the face and goes home in an audi feeling like a million bucks. >> we were talking earlier about why would you market a $50,000 car to youngsters like that. it's getting the group who remembers those movies. >> my lease is up. i'm getting -- >> -- a little focused
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14-year-olds in my basement, and they liked the oreos. the oreo commercial prompted a little bit of a debate whether the outside of the cookie or the inside of the cookie. >> really? >> i liked the oreos. >> i liked some other ones -- >> what about taco bell? >> the taco bell, again, i think that was similar to godaddy. kind of made me a little uncomfortable. >> godaddy again just because -- >> no, no, definitely don't! >> it was great. >> the taco bell ad that i don't think they showed when they had an old guy in a rascal that was amped up driving around late night on the field knocking stuff over. >> what about the other godaddy commercial which i thought was really effective. the one of the guys who addhad idea. the guy -- as a business commercial i think that one takes the cake. so we're sitting there and the guy is, i got this idea and the wife is like, get it out there. go do it. i got this idea and they switch to another guy and they all have the same idea.
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except for one guy who is in the jet plane who actually got the website and put it online. >> and deutsche did that ad and they have the challenge because they knew that danica patrick the brand, and i got a little flat footed after my last one, she hasn't won any races and she's beautiful. >> she said she was stale. >> i know, people have -- >> how much was she paid? >> bar rafaeli? >> how much. >> my guess is she -- she -- the reporting is she wants the exposure. she wants to be out there. so i don't think there was -- she didn't command a premium per se because it's bar rafaeli because i think she wants to be out there. but probably a high six figure, mid six figure. >> you know how many takes? >> but i wanted to tweet that. how many cakes does that kid have to generate the noise. >> it was the noise. that was the problem. >> i'm telling you, i don't know what it is. >> you would have blown that kiss several times to make them
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do additional takes. >> yeah. >> okay, brian, thank you. coming up is now the time to hop on board the profit train? or is the opportunity left the station? markets and investing opportunities next checking the futures. right now "squawk" facts. at 1:45, the aflac duck was brought in with multiple lacerations to the wing and a fractured beak. surgery was successful, but he will be in a cast until it is fully healed, possibly several months. so, if the duck isn't able to work, how will he pay for his living expenses? aflac. like his rent and car payments? aflac. what about gas and groceries? aflac. cell phone? aflac, but i doubt he'll be using his phone for quite a while cause like i said, he has a fractured beak. [ male announcer ] send the aflac duck a get-well card at getwellduck.com. [ male announcer ] send the aflac duck a get-well card but that doesn't mean i don't want to make money.stor. i love making money. i try to be smart with my investments. i also try to keep my costs down. what's your plan? ishares.
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there's a couple of ways you could do it. ♪ ♪ or just go to e-trade and save it. boom. ♪ more "likes." more tweets. so, beginning today, my son brock and his whole team will be our new senior social media strategists. any questions? since we make radiator valves wouldn't it be better if we just let fedex help us to expand to new markets? hmm gotta admit that's better than a few "likes." i don't have the door code. who's that? he won a contest online to be ceo for the day. how am i supposed to run a business here without an office?! [ male announcer ] fast, reliable deliveries worldwide. fedex.
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the dow closing above 14,000 for the first time in more than five years. can the rally continue or are markets headed for a blackout? we're adding some notable voices to the market discussion. david bianco from deutsche bank. vanguard's jack bogle and delphi's scott black. >> as the baltimore ravens claim super bowl victory. but the game last night also revealing winners and losing in advertising, entertainment, and of course power management. the third hour of "squawk box" starts right now. ♪ back to "squawk box" here on cnbc, i'm andrew ross sorkin along with becky quick and steve liesman. joe kernen is off today. u.s. equity futures at this hour. can you see them right there. got some red arrows across the board. dow looks like it will open up
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about 54 points off. nasdaq off a little over six points and the s&p 500 would open off a little over five points. friday the dow closed above the closely watched 14,000 level for the first time since 2007. now, just 154 points from its all-time closing high and we've got a big lineup to cover the markets this morning. a lot of people want to talk to you. barry knapp and ian shepherdson are still with us. also david bianco, chief u.s. equity strategist at deutsche bank. we're also going to be talking to van guard's jack bogle on why you shouldn't let the pies in the market become a distraction from your portfolio strategy. and then at the bottom of the hour, investment ideas from scott black of delphi management. so we've got a lot to talk about. but first steve liesman with the morning headlines. >> among the stories, japan airline says it will talk to boeing about compensation for grounding of the dreamliner. the airline estimates the idling of its 787s would cost it nearly
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$8 million through the end of march. and what's in a name? research in motion will officially become blackberry at the nasdaq today. it will trade under bbry. the name and ticker symbol change will be effective before the open. shareholders still have to approve the change at the annual meeting which takes place in july. and this year's super bowl will be remembered nearly as much for the midgame stadium blackout as for its exciting ending. power went out in new orleans superdome for 34 minutes. interrupting the third quarter, keeping me up much later than i should have been. the outage was blamed on an abnormality in the stadium's power systems triggering an automatic shutdown. when the lights went back on the 49ers rallied but still fell short. the ravens won. we'll talk more about the game, the commercials and the social media response at 8:30. >> in the meantime, our all-star panel. jack bogle is the u.s. chairman of the vanguard group. he joins us this morning along
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with david bianco who is chief u.s. equity strategist at deutsche bank. david will be on set with us for the next hour along with our guest hosts who have been here for awhile with us. barry knapp and ian shepherdson. jack, why don't we start things with you this morning? a lot of people hear 14,000 for the dow, they get excited about that. you say slow down a little, don't just look at those numbers. why is that? >> well, they're just numbers. they're a little noise in the market, and while the dow is close to an all-time high or at an all-time high, the nasdaq, big, big index not too many years ago, back early 2000, back around 4500, and now it's 3200. so it's down about 30% give or take. it all depends what you're watching. what kind of stocks you own. very different kind of a rally this time. with more of the industrials. the s&p particularly had a great year lasts year because of apple. apple was a huge contributor and this year taking away and the
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s&p is still going to good highs. kind of a jungle of numbers. >> maybe one good news is if it makes people sit up and pay attention, people who have moved away from the markets who got really frustrated by what happened back in 2008, and ever since then if they haven't been investing maybe it's good news if it makes them sit up and pay attention and realize that this is something they need to do for a long-term strategy, correct? >> well, i certainly agree with that. but on the other hand, the time to get bullish was when it was bearish in february of 2009. and the market's gone up 100% since then. so they've missed a great opportunity. i think all these things are so mixed up in the minds of investors they should realize guessing whether it's going to go down 50, 50%, or up 100% as it did since then, thigh should just be investing all the time. ride through those currents. >> that brings up a very good -- >> stay the course. >> that brings up a very good point people are sitting around
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now wondering, i did miss a great opportunity. is it too late to get in? >> i don't think it's too late. january was up 5%, that's causing people to stand up and sit up and take notice. i think to jack's point i can understand that you don't want to be buying at the high. i don't think that's the case. plenty more upside. also he's making a point which is one of time diversification. you should not be trying to find the bottoms and not being concerned about it being the top. if you're regularly buying, you'll get the benefit of numerous entry points. i think that's what investors should be doing. >> is that to say if there's a big pullback it wouldn't be the time to double down? >> yeah, and the trouble is is that we always look for pullbacks. i can't tell you how many investors are looking for an opportunity like that right now. there's maybe nothing wrong with keeping a little bit on the side. but i think the risk is the market grinds higher and finds a new high on the s&p and probably sooner on the dow the next two,
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three months. >> jack, is this a good time right now to rebalance the portfolio, take a look at what you think your right mix is and ostensibly the equity portion went a little higher here so would this be a time to take some of that money off the table to get back to averages that make sense to you? >> rebalancing is an idea that doesn't have much appeal to me. first it should be done only in a very broadway. if you want to be a 60% equity position for example i wouldn't bother rebalancing it when it goes to 61 or 62 or even 65%. maybe at 70% you might think about getting back toward the 60 gradually. but i'm a gradual mover. i'm a regular invest regularly whether you think the market is high or low. and you know, rebalancing in the long run, has to be a costly strategy. we know this. because the higher yielding asset is going to be stocks over bonds. in the long run.
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and just about any period including the one, decade that's coming up here. so it's something you should think about and not do slaveishly. >> jack, vanguard sells a number of funds that are retirement targeted. specific age and then they keep rebalancing, by the way. traditionally, the older you get the closer they get to bonds. are those the right funds to be in in this environment? >> well, when you think about van if guard's target date funds, for example, our oldest fund down here, wellington fund, it maintains roughly a 65% equity ratio and that would be kind of middle of the road balanced funds position, and part of that is, because we're selling a balanced fund. an interesting part of the mutual fund business is you have to rebalance, because if you let that 65% go to say 80% you won't have the balanced fund you're offering the public. so the market is sort of discipline. i hate to talk about that because i don't like marketing in this business very much.
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but that's a strategy. but i don't think it's a strategy all investors need to follow. >> jack, when you're looking in the market and thinking ahead six, nine months are you willing to look beyond the risk of the payroll taxes going to hit all those consumer facing businesses, and are you talking sort of the broader perspective that actually the economy really is healing properly now or does it make you nervous looking on the short-term? >> well, the market makes me nervous. i think on the short term, probably all the time, ian. you know, i just don't know how to predict it so my way of doing things has been for years and years and years, look out ten years. that means ignoring the short-term, ignoring the 6 to 8 months, ignoring the change in the tax. there are always a lot of factors out there that could be helpful or harmful, that tax is obviously going to cut into consumer spending at least a little bit in addition to that fact. but look what you're reading about i think in the morning journal even about the
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tremendous charges, the overoptimistic corporations are taking because they've overestimated their pension fund returns. i've been talking about that issue for years. it's going to be enormously expensive. verizon just took $5 billion i think it was charge. dow is talking about a similar charge. that's a lot. dow chemical. and there's always something, hundreds of things that influence the market. and i wouldn't separate any one as a single, let's say causative effect. >> jack, if i heard barry knapp right earlier you guys disagree a little bit here. you're waiting for a market pullback and you're sort of saying folks ought to be waiting until that market pullback till they get back in. these are high levels to get in. >> look, we argued that we thought we would have 10% total return this year. we earned a fair bit of that already. we think that what's likely to happen in the next quarter is once again we'll be a little bit
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disappointed on the growth side. so we've been telling people stick with the parts of the market that stocks with bond-like characteristics, high dividend buyers, we think you'll be able to weather a pullback through that. but to pile into the cyclical parts of the market after you've had a big run-up to us strikes us as a recipe for probably having happened what happened each of the last three years. i get asked this question all the time what about the flows? now, what i've seen i told people i've seen money flowing out of fixed income into the parts of the stock market that looked most like the bond market for some time right? those high dividend payers have been performing pretty well. when i speak to money managers who have a broad offering that's where the money has been going. is that what you guys are seeing or seeing money go into the more cyclical parts of the market or the more defensive parts of the market? >> we're in a tough position to answer that question because our business is totally dominate d y
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index funds. they own everything, high yields, high growth, and i think that is the best strategy. i mean, high yield stocks are going to do better than the market in some periods. and worse than the market in some. in the long run, there's some evidence that says that high dividend stocks will do better than the market. but the evidence is not really compelling. and like all of these things they're period dependent. you start your comparison at a certain date and you get one result. you start it in a different date and you get another. and they're easy to manipulate. i like the idea of high yielding stocks, an index of high yielding stocks. high dividend stocks or dividend growth stocks. because it's so hard, the tough thing about this market is the alternatives to stocks are, might as well say it, terrible. you know bond yields are awful. money market yields are so close to zero that you can't tell the difference. so i think you have to think about stocks a little bit different way. if you're willing to take the
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risk. some people are constitutionally able to do that and some are not. >> part of the reason we like that sector so much you talk about periods of comparison, i agree. but one we think is really interesting is the last time when the fed was monetizing debt like this in the aftermath of world war ii, they were capping interest rates, real interest rates went decidedly negative. those high dividend payers performed incredibly well already at a point when the fed started normalizing policy, the fed quarter 51 while the fed was intervening and then in the bull market they gave up the go. so, to us, as long as we're in this extraordinary fed environment seems like a decent period of comparison. i get your point that no two periods are exactly the same, but this seems like a compelling argument for those stocks. >> well what happened then, it's interesting we talk about these stock deals being competitive,
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or a little above beyond yield, we're talking about yield on stocks of around 2% or 2.1%, and back in those days, which i lived through, you could find an awful lot of stocks, the average stock yield was probably 6%. and you could probably go to 7% with quite a few stocks so they weren't as susceptible to things like higher interest rates. they were very generously priced and that went on up until 1974 when the yields came way down. at the 1973 peak at the beginning of the year and got back actually to 7% range at the 1974 low. at that particular beyond of that particular bear market which happens to be when we started vanguard. that was good timing. >> jack, thank you, always great to hear history lessons from you especially when you live through those times. we really appreciate you joining us this morning. we will talk to you again soon. barry, david, ian, they're going to be staying with us. >> wow, who wants to let jack
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bogle go. we have -- we'll get him back. more on the markets still ahead. we'll talk tech nags with jeff weiss, and at the bottom of the hour, value picks from scott black from delphi management. and check out the "squawk box" market indicator.
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welcome back to "squawk box," everyone. you can see that after moving lower this morning, the dow futures have taken a decided turn south as have the s&p futures. at this point those dow futures are close to triple digit losses. s&p futures are down 10. this is coming after five weeks of gains for the markets where you saw some massive moves. market is up about 5% for the month of january and on friday the dow pushing through the 14,000 level for the first time since october of 2007. you did see a little bit of a giveback. that's still about just three quarters of one percent for the dow futures. we'll see what happens as we get a little closer to the opening bell. also in our headlines, oracle is
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buying acme packet for $29.25, about $1.7 billion. acme packet provides what's called session border control technology. that deals with the delivery of next generation voice data and other communications. and applications across ip networks. shares of acme packet are currently halted. 23.39 was the last tick. steve? >> dow closed above 14,000 on the first trading day of february. it's time now to talk technicals. jeff weiss joins us now. the chief technical analyst at tejas security. what are you seeing here? is this a double top created by a double shoulder neck bottom? >> don't give me that now. you're taking joe kernen's spot. he's away. three things have gone on here, gentlemen. and becky. november 16th and november 19th we had what in technical jargon is a positive outside day, followed by an upside gap. now, as you smile, you may note that the nasdaq did something similar when, right around thanksgiving of last year, and
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you see what the market did, and so far it's doing that this time around. the second thing which we brought up several months ago, when joe talked about the potential for a large market gain, that is what so few people look at today and that's the monthly closing start of the s&p 500 index, which has emerged from a base going back to the 2006-2007 period. this is the same chart we feature featured several months ago and the key to this base being completed was the december close, four months in a row, the s&p closed above the 1414 scenario. >> what does that mean it does next? >> this means in my opinion that the primary trend of the market is up. the fuse was lit in mid november, with again what in technical marken are some fairly
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powerful reversal formations and the key now, as always, because i lived through '73, '74 is to manage risk and realize that initial support on the s&p is back in the 1470, 1480 intraday area. >> does that sound like a melt up scenario that we talked about a little earlier? >> it does a little bit and i look at charts not so much for patterns but to take a chart and overlay it with historical events. things look similar to last year. last year got off to a strong start one of the biggest points of resistances. how do we know it's not going to roll over this spring and get worse? europe doesn't look like it's going to take the lime light again. we don't have the fiscal cliff at the end of the year as we did last year and we can look back with a prior year, see incredible earnings support. so i agree with the views that he sees in the stock market because i think what he's seeing in the charts is a read on the sustain abili
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sustainability of the earnings. i think that will continue. >> earnings isn't what i'm really talking about. people used to talk about -- p/e to me that was the symbol for philadelphia life. >> can we go back to the chart? at the tail end there, this is now the arrow is where we are today? >> the arrow shows now we've raised longer-term support on the s&p, on monthly flows to the 1430, 1440 area. that's the dashed horizontal line. the dual solid lines below that andrew are the 1400 to 1410 area and remember in an age where people are looking at shorter and shorter and even shorter curve movement, taking it overview of the market unfortunately has become a lost art and by looking at the monthly closing chart at this base and the chart i'm going to show you next, which is a weekly closing chart going back to '02,
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that to me is how staying power up and down in the market gets built. >> she me downside. >> i'll mention 1470, 1480 back in january of '08 the s&p fell 200 intraday points in one 30-day period in january of '08 from 1470 to 1480. that's why on the way up last september, last october, where was the peak in the market before the correction? people were waiting to get even. it was 1470, 1480. now that we're above that area by 2%, 3% to me it makes sense to look back in history and see that if we have a short chart, past the reaction. that that area under 1500 and above 1465, 70 of support. the chart i'm just showing andrew in my friends want to put it back up is the weekly closing chart of the s&p connected low from october of '02, and early '03. we have now gotten above that
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trend line at 1500 on a weekly closing cases. as i message out there, consistent with all of you knowing your downside before you even look at the upside, is that we now need as many weekly closes as we can get in or above the 1500 area in the coming friday closing period. >> thank you. >> all right. thanks very much. >> thank you, steve. >> coming up, shares of herbalife getting hit. is that my read -- >> it was mine. >> i'm still confused with what to do with my monitor over here. how i get from technical analysis and -- >> when you pull back to his trend line you're supposed to buy it. >> okay. but i need to subscribe to his newsletter to know that, right? >> he just gave you the levels. >> okay. >> you get it? >> of course. >> it's the break. >> we're going to talk about herbalife when we get back and he's a member of the prestigious barron's roundtable, delphi management scott black for value
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we are becoming a new american. refaeli. welcome back to "squawk box" everyone. we've been watching shares of herbalife. they've been getting hit after "the new york post" reports that the company is the subject of a
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law enforcement investigation after a freedom of information act request revealed 192 complaints were filed against that company over the last seven years. those complaints suggest that false promises were made by the company, as well as difficulty distributors had in collecting income and getting refunds. some of these complaints were made months and years before pershing square's bill ackman made his accusations against the company, as well. when bee come back, we're going to get you ready for the trading week ahead. we will head to chicago for the view from the futures pits. plus, julia boorstin will join us with more on the super bowl buzz stories of the morning. ♪ ♪ ♪ ♪ [ male announcer ] concept. calvin klein underwear. 360 seamless technology.
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welcome back to "squawk box." look at stocks in the news this morning's trading. networker garmaker acme packet. is that the whole thing -- acme packet for $1.7 billion. net of cash owned by that company for $29.25 a share. the price represents a 22% value over the close. boeing shares moving higher despite the news that japan airlines will discuss compensation because of the grounding of the 787 fleet. jal says the groundings will cost it nearly $8 million this quarter.
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and walmart downgraded to neutral from overweight at jpmorgan chase. the firm had upgraded walmart in november but says most of the events that prompted the upgrade have been priced into the stocks. another retailer wet seal says it's president and chief operating officer has resigned, cutting 35 jobs and planning to eliminate the coo position going forward. also implementing a repurchase program. >> you don't know wet seal? >> teenagers. >> i don't do companies, becky. you know that. i do macro stuff. you guys get -- you're really good. >> this is fun for us. >> all right our buzz story of the morning. the super bowl blackout. julia boorstin joins us for more on the effect of the blackout on advertisers and on cbs. julia, i've never seen anything like this. this must have created a bit of a headache. >> it was pretty phenomenal. i mean i'm sure jaws were dropping and there were a lot of headaches going on back in the production room for cbs.
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it did end up being a big win for several advertisers and if the blackout gets credit for the gaming so close it helped cbs as well. of course the people are less likely to change the channel if the game was very close. the biggest winner was bud light. played in extra time once during the delay and once after the game resumed. that 60 seconds of free air time is worth between $7.5 million and $8 million. subway also benefited from a replay of its 30-second spot during the blackout cbs ran extra promos for its shows, issuing a statement saying that it treated the blackout like breaking news, and that quote all commercial commitments during the broadcast are being honored. verizon media tells me that the biggest loser of the night may have been the cbs postgame episode of "elementary" as the start time was delayed. ad gate also says post game advertisers like coca-cola could not have been very happy.
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in coke's case it delayed the conclusion to the story of its second quarter ad. it of course released who won that race in the desert. now the real winner may have been twitter. the power outage drove the peak of conversation during the game, 230,000 tweets per minute. and ads around searches for power outage began just four minutes after the lights went out. that's moving pretty fast. now several game advertisers instantly turned the outage into a marketing opportunity. most notably oreos tweeted power out, no problem, you can still dunk in the dark. that was retweeted, including by myself, 10,000 times within just one hour. and audi tweeted sending some l.e.d.s to the superdome. that's been tweeted nearly 10,000 times. and then tide another super bowl advertiser tweeted we can't get your black out, we can get your stains out. becky we'll be watching for the ratings which will be due out later this morning. >> julia, i had turned off the
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game after the halftime show because i figured it was a blowout then i saw on twitter what was happening and turned the game back on. maybe they win some kudos for that. i can't help but think the advertisers are going to be vying for anything to get that money back if you paid millions of dollars and it happened when the game wasn't playing. at least you'd have some sort of argument to go back to cbs and say i want some sort of a make-good. >> absolutely. i think it's really interesting the language that cbs said in its statement. they're honoring all of their commitments. now with certain advertisers they may have been promises about sort of running ads during certain points of the game. and that's why they didn't just go ahead with the commercial breaks during the outage. cbs didn't know what was going to happen. no one knew what was going to happen so they had to wait and once the game resumed they continuing playing ads, sort of at the points where they had promised advertisers. but it's interesting, during the outage, they didn't really know what to do. they played some ads and replayed those ads. then they played those promos for the shows and i think that those promos may have had a big
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impact because everyone turned the game back on, like you, they were waiting to see what was going to happen. >> julia, i miss all the threads when they happen. i'm five or ten years down the road. when did this instantaneous corporate quipping come about? tide or audi would put the -- >> only in the super bowl do they do this. >> is this a new thing? did they have ad guys hanging around to come up with phrases? like daily news headline writers to come up -- >> well, steve, exactly. that's exactly what happened this year. and this year was the first year that twitter was really an integral part of the super bowl. this year, half of all ads in the super bowl had a twitter hash tag, and most of those advertisers had a chief marketing officer or someone watching in realtime monitoring tweets about ads. >> so this is new. i am not three years behind this trend is what you're saying? >> no, you're not. i'd say two years ago there was one twitter hash tag during the super bowl. last year there were a handful,
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maybe five or six. this year half of the ads had twitter hash tags. if you're an advertiser in the super bowl, if you included twitter hash tags you have a marketing executive watching in realtime what's happening with twitter. so you can react with tweets. the fact that they were ready to go when the lights went out and could come up with something funny and create a graphic and post it on twitter, that's very smart. and it's because they know that the twitter conversation is just as important as the 30 second spot. >> this changes everything, julia, because right they spend so much time thinking about the corporate message, meetings and focus groups and now all of a sudden you take the corporate message and you put it on instantaneous basis it sounds like there's room for error here, too, right? >> there's room for error but there's also huge potential for something to go viral. i mean i think as always they have to be really careful that the ad message represents the brand, accurately. not making it more sexy than they want it to be. for oreo they had a cute ad
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during the bowl game itself and then they figure out how to make the conversation go viral, and for them that's millions and millions of dollars of free advertising. i mean, oreo could not have bought ads that got it the kind of conversation it got on twitter puns it put this up there. >> i was not following twitter because i was watching the game on tape delay. >> what? >> with a 14-year-old. >> what? >> because we were going back and talking about the plays we like to talk about the football. because there was a little bit of football in between the ads. so we'll go back and so i didn't follow twitter because i didn't want to know what had happened which creates a whole other reality. >> that's crazy. >> that's crazy enough to watch it in realtime? >> i'm with you, steve. >> we like to look at the plays. >> steve, you said delay. >> tape delay. >> visual delay. >> make sure vcr on this. >> i think performed at the halftime was good, too. >> beyonce. >> she was fantastic!
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>> julia, thank you. >> by the way, a programming note. not a programming note, brian shactman is writing in, bar refaeli, how many takes? go daddy commercial took. 45 takes. >> oh, wow! >> so kissing her 45 -- that went on for a long time. so that was -- >> wow. >> we should be showing images of this moment. >> but people are eating breakfast. >> people are eating breakfast. you can find it online. in the meantime let's get a check on the markets. rick santelli joins us now from the cme in chicago. you would have been happy, i don't know, being part of one of those takes. i think a lot of people would have been. >> eh, not so sure. i think i'm happy not being in any of the takes. take the market, though. i find it ongoing fascination with the increase in equities, with the giveback in equities, and how little real big movement there is in the fixed income markets. you know the foregone conclusion
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of higher interest rates has materialized. we closed at 176 the end of last year and we're hovering at 198. so you know, a little over 20 basis points. but i guess what's interesting is whether it was november or december sell-off for now, 2% is still the line that everybody's concentrating on that has not shifted. the euro currencies had a rather large reversal under some pressure today. i think that trade really merits some looking into. even though there's only a handful of players that are benchmarking their lack of height against the -- i still think the euro relationship flipping with the 137 handle, monitoring that against, for example, the euro/yen, or the dollar/yen, is going to be what people are going to be doing this week. data light week which is usually normal after the jobs report. trade deficit. normal cast of characters with claims. no supply. coupon supply until next week.
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all in all the digestion process, the excitement of equities, and the lack of excitement within the economy, those continue to play out in the face of the sequester. >> rick, we had a little discussion earlier about the euro. i was actually in europe last week, and a number of investors i spoke to were concerned about what that would mean for the burgeoning recovery, if you will, places like germany that are so dependent on exports. i think you're on to a great point. so i don't -- i'm also interested in is there any buzz on the floor this morning about the 20 basis point backup in the spanish tens this morning and the cds moving out in italy and spain are people concerned about that risk and is europe do you think europe can come back on to the radar screen or you know were people just assume that the ecb's got things under control and you know move on? >> let's go in reverse order. the lgro last week being much smaller there seems to be a conventional wisdom on this floor that when it comes to interest rates that it's a two
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bedroom house. they have gotten the funding issues under control. they didn't fix them. they have them under control and now it's going to be to monitor the unemployment situation, europe, southern europe predominantly, how the german economy can continue to pull bigger, bigger load uphill, and all that then becomes priced into what's going on with the yen. many traders down here think that the biggest relationship and the biggest point of anxiety in foreign exchange trading will be how the japanese car exporters deal with the german car exporters and what will be an escalating currency devaluation. >> okay. rick, we'll leave it there. we will see you i'm sure tomorrow and throughout the day. coming up, portfolio picks from delphi management scott black. we're going to ask him what sectors will lead the rally and what could derail the market's bull run. with fidelity's new options platform, we've completely integrated every step of the process, making it easier to try filters and strategies...
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welcome back to "squawk box." the futures under increasing pressure. we started the morning down about 25 on the implied open, and now it's down about 90 or so on the dow. 15 points on the nasdaq. about nine points on the s&p. becky? >> steve, thank you. the dow is crossing 14,000 for the first time in more than five years. we've talked about this a lot today. our next guest is one of the all-stars of barron's roundtable. where is he telling investors to put their money right now? joining us from boston is scott
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black. he's the founder and president of delphi management. and scott, we've been lucky enough to talk to you several times over the last month or so. and, when you see what happens with the dow 14,000, is this a point where you start to get a little concerned about how quickly things have run up? or is this just a time to double down? >> well, we're fully invested at all times, becky. and if you look at the s&p as opposed to the dow as a proxy, they closed at 1513. it's roughly at 14.6 multiple. so it's reasonably priced. i would make the point, though, that if you look at the russell 2000, and the russell 2500, which are basically proxies for small and mid cap stocks, they're over 17 times expected earnings. so they're expensive as a homogenous group. the point being, this is being fueled by the fed. they're printing money. the balance sheet's over 3 trillion. we're probably going to have 85 billion a year which would add another trillion. maybe underpinnings of the economy really belie what's going on in the stock market. >> so you're in the camp that
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says this is a situation where you can't fight the fed, but you don't love what you're seeing economically? i think, ian, you've said similarly you're worried about the economy, too? >> a trillion dollars a year is a very big argument not to run away from the stock market. our money's got to go somewhere. >> so, scott, if the fed's there and it's printing and it's full speed ahead, do you fight it? or do you start to worry about what happens when the economy does improve, and the fed, therefore, takes its foot off the gas? >> i don't think they're going to take the gas off -- the foot off the pedal in the near term. i think what you have to do is just keep concentrating on buying individual stocks that are cheap. we're not going to go out there and buy 15 or 17 multiple stocks. so it's really a stock picker's market. but you have to be cautious. one of the things, i know steve covers economics. if you look at disposable income, not all disposable income is trailing nominal gdp. and that doesn't bode well for the economy in that 17.5% of the economy is consumption portion of the gdp. >> let me ask this question to
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the table. does anybody know how easy the fed is right now? in this world where there's no interest rate to gauge it by, no nominal rate to judge it by and compare it to, how easy is the fed such that if we talked about the fed removing accommodation, barry, what does that look like? ian, what does that look like? answer that question, how easy is the fed? >> the balance sheet tells you how easy they are. and the rate of expansion. we've got the stock which is enormous but also increasing by $85 billion a month. >> what would neutral be? >> not -- >> you don't -- >> i can tell you they're very easy but i don't know what neutral is and they don't know either. nobody knows. the only thing i'm pretty sure about is when we eventually go back to neutral it's going to be painful getting there. >> you know what real interest rates are. we can debate the next ten years of inflation. >> which would be. >> 2%, 2.5% >> >> so how easy is the fed in that -- >> it's quite accommodative. >> quite accommodative.
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>> look the long-term trend for fives, for example, nominal five-year treasury yields is roughly nominal gdp. so nominal gdp is running at a much slower rate than prior cycles, but those five should be somewhere around 3.5%. >> so 300 basis points easy is what you're saying? >> 2.5? % roughly. >> i mean if you -- if you use that as a metric. much more -- >> because the -- >> we only have two minutes. i want to get some specific stocks. scott you did say that this is a stock picker's market. you said you have to be really specific. what stocks are cheap right now? >> well, we have intermediate stock about a 14 billion market cap, endsco, esb. they're the second largest offshore driller but they've got the newest fleet. so day rates are going up, the capacity utilization is over 90% on their floaters, the earnings will explode this year to about 7.10 to 7.20 up from about five
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and change and so you have nice tail wind on earnings momentum only an 8.9 multiple. and this year they turned the corner. they've been running negative free cash as they've replaced their fleet. this year they should be free cash flow positive about $1.1 billion -- >> -- what do you -- >> i think the stock pegged 11 to 12 multiples and run to 85 to 90 dollars a share. as long as brent crude stays above 80 people continue to drill offshore and of course brent crude is about $30 a barrel higher than the market corporations used for their capital budgeting. >> so above 80 is the key, though? >> on brent, not on west texas interimmediate yat. >> and your -- >> it's a tiny little company, about a 750 million market cap called triangle capital. it's a bdc. it's already had a nice move but it's a very good company. the stocks about 27. i think they'll do 235 this year
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puts it at 11 multiple but the viewership just looking for yield with growth you've got a 7.7% yield, the dividend's well protected and they're growing their portfolio. it's mostly mezzanine financing but the picks included their average interest rate on the portfolio is approximately 15%. their loan/loss ratio is excellent about 1.5% of assets and they have the lowest sg&a ratio of anybody in the industry, just under 2.5% of gross loans. so they're not stealing from the shareholders. they're not stealing from the shareholders. i think it's an interesting play. you get yield, plus growth potential as well. >> scott, is there one sector that you think is really cheap at this point? relatively speaking? >> not really. i think we've had systematic increases across the board. i would avoid chasing a lot of the tech stocks, because there's no earnings momentum, things like semiconductors, semiconductor capital equipment. the consumer stocks, probably
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fully valued here. a lot of them only have 2%, 3%, 4% top line growth which is nominal gdp. you can't say this sector is systematically underpriced at this given moment. >> scott, i would like to ask for your thoughts on technology, particularly the large cap enterprise spending technology companies. it's overshadowed by names like apple. smaller ones i agree with. the enterprise part of technology, talk about stocks with low epes, low interest rates, how do you feel about that space? >> the one we used on the barron's round table, i didn't want to reiterate, was qualcomm. they benefit whether it's apple or samsung. over $16 a share in cash. if you net that cash out of the stock price, which is in the mid-60s, you still have about 11, 11 1/2 pe for a legitimate 20% growth. another stock we own but the
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growth rate has slowed a little bit is emc. the regular enterprise storage business which used to be 8 to 10 is closer to 6 to 8. if you back out roughly $4 a share in cash, because that's the net cash on the balance sheet, the stock is about 11, 11 1/2 multiple. it's reasonable. but it's very difficult to find tech stocks with earnings momentum that are cheap on a pe basis at this point. >> all right. scott, thank you very much for joining us. we will talk to you again soon. >> thank you very much, becky. >> when we come back, we've got new details on the government's insider trading case against s.a.c. plus, the last word from our trio of guest hosts. steve's going to lead this. you'll follow up with this conversation here. >> yes, we will. >> "squawk" will be right back.
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making headlines this morning, a new twist at the center of the government's insider trading case against a former portfolio manager at s.a.c. it includes a trade that directly involves steven cohen, and possible line of defense they may take for the portfolio manager, and more importantly may raise questions about
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whether the government could build a case against cohen. federal prosecutors have claimed s.a.c. dumped too many shares in 2008 after the former employee matthew martomo received secret information from a doctor about a drug. they said s.a.c. shorted the stock after the announcement of bad news. but trading records reportedly indicate the hedge fund did not have a negative bet in place, in advance of the announcement of the drug trial's disappointing results. the records now indicate s.a.c. had no exposure, changing the narrative over what was happening here. often times, hedge funds ahead of a big announcement, whether they're long or short try to get neutral and that may become the defense of what happened here. having said that, if it is true that there was inside information that they had and was material before they did this, whether they avoided losses or went short doesn't really matter. the question is, what does this
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mean to matthew martomo and more importantly to the s.e.c. case against steve cohen. >> i think the position they got neutral on -- >> they were long $700 million. which is big. >> that's substantial. >> i'm sorry, we have to talk about it. >> they had a $50 billion portfolio. $700 million, $50 billion, that's a lot. >> we'll get the last word on the market and the economy from our guest hosts coming back. i'm lorenzo. i work for 47 different companies. well, technically i work for one. that company, the united states postal service®, works for thousands of home businesses. because at usps.com®, you can pay, print and have your packages picked up for free. i can even drop off free boxes. i wear a lot of hats. well, technically i wear one. the u.s. postal service®, no business too small.
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